Pharmacies across the United States are closing at a pace not seen in decades, driven by a combination of shrinking profit margins, opioid lawsuit settlements, and a business model that increasingly pays pharmacies less than what their medications cost to stock. Between 2022 and 2025, CVS alone closed or announced closures of roughly 1,170 stores. Walgreens plans to shutter approximately 1,200 locations over three years. Rite Aid, after filing for bankruptcy, identified 316 stores for closure and couldn’t find buyers for customer records at 200 additional locations.
The scale of these closures has real consequences. Nearly 16 million Americans already live in what researchers call pharmacy deserts, communities that are both low-income and far from the nearest pharmacy. Every closure risks expanding those gaps. Understanding why this is happening requires looking at several forces hitting the industry at the same time.
Pharmacies Are Losing Money on Prescriptions
The single biggest factor behind pharmacy closures is that filling prescriptions has become financially unsustainable for many locations. The companies that manage prescription drug benefits for insurers, known as pharmacy benefit managers (PBMs), set the reimbursement rates pharmacies receive. Those rates have fallen so low that pharmacies frequently get paid less than what they paid a wholesaler for the drug in the first place. Staff salaries, rent, utilities, and other overhead costs aren’t factored into reimbursement at all.
A U.S. Department of Health and Human Services analysis quantified just how dramatic this squeeze has become. Pharmacy margins on retail drugs dropped from 7.3% in 2020 to 3.2% in 2022. In dollar terms, total pharmacy margins fell from $23.1 billion to $12.2 billion in just two years, a 47% decline. Meanwhile, PBM margins moved in the opposite direction, climbing from 23% to 31% over the same period. By 2022, PBMs retained 45.5% of all spending on generic drugs, while wholesalers and pharmacies combined kept just 33.5%.
PBMs profit through several mechanisms that work against pharmacies. In spread pricing, a PBM might reimburse a pharmacy $30 for a prescription while charging the insurance plan $45 and pocketing the $15 difference. PBMs also collect rebates from drug manufacturers, estimated at $223 billion for brand-name medications in 2022 alone. They aren’t required to disclose how much of those rebates they keep versus passing along to insurers. This lack of transparency makes it nearly impossible for pharmacies to predict or negotiate better terms.
Opioid Settlements Drained Billions From Major Chains
The three largest U.S. pharmacy chains agreed to pay a combined $13 billion to resolve lawsuits alleging they contributed to the opioid crisis. CVS committed roughly $5 billion to states, municipalities, and tribes over a decade. Walgreens agreed to pay up to $4.5 billion over 15 years. Walmart’s portion was reported at approximately $3 billion.
These settlements didn’t cause the pharmacy business model to break, but they landed on balance sheets already under severe pressure. For chains already operating on thin margins and looking for ways to cut costs, the financial weight of opioid settlements accelerated decisions to close underperforming stores rather than absorb ongoing losses.
Online Pharmacies Are Pulling Customers Away
The rise of mail-order and online pharmacies has shifted a meaningful portion of prescription volume away from brick-and-mortar stores. The global online pharmacy market was valued at roughly $110 billion in 2023 and is projected to reach $286 billion by 2029, growing at about 17% annually. Over-the-counter products drive the largest share of that growth, since they don’t require a prescription and are easy to order online.
Some PBMs make this shift worse for independent and chain pharmacies by steering patients toward PBM-owned mail-order pharmacies. When a PBM owns the mail-order operation, it captures both the management fee and the dispensing margin, removing the local pharmacy from the transaction entirely. For a neighborhood pharmacy that depends on prescription volume to stay open, even a modest loss of customers to mail order can tip a location from marginally profitable to unprofitable.
Rural and Independent Pharmacies Are Hit Hardest
Rural communities have been losing pharmacies steadily for nearly two decades. Between 2003 and 2021, the number of independently owned pharmacies in the most rural counties fell 16.1%, and in small-town (micropolitan) areas by 9.1%. Over roughly the same window, independent pharmacy counts in metropolitan areas actually grew by 28%. The market isn’t shrinking everywhere; it’s concentrating in places with higher population density and better margins, leaving smaller communities behind.
By 2021, rural areas had lost a net 596 independent pharmacies compared to 2007 levels. That number may sound modest, but each closure in a rural county can mean the nearest pharmacy is now 10, 20, or 30 miles away. For elderly patients, people without reliable transportation, or those managing chronic conditions that require frequent refills, that distance creates a genuine health barrier. Researchers define a pharmacy desert as a low-income area where at least a third of residents live beyond a reasonable distance from any pharmacy: one mile in urban areas, five miles in suburban areas, and ten miles in rural areas. Roughly 15.8 million Americans, about 4.7% of the population, currently live in these zones.
Retail Theft Factors Into Closure Decisions
While reimbursement rates and shifting business models are the primary forces, retail theft plays a supporting role in determining which specific stores close. The American Pharmacists Association has highlighted that when large corporations evaluate which locations to shutter, the level of theft or “shrinkage” at a given store increasingly factors into the decision. A store already losing money on prescriptions becomes even harder to justify when its front-end retail products are walking out the door. This dynamic has been particularly visible in urban locations where organized retail theft has escalated in recent years.
Where the Money Actually Goes
The core problem is a supply chain where the intermediaries are capturing an increasing share of every dollar spent on prescriptions, while the businesses that actually dispense medications to patients see their share shrink. In 2022, PBMs retained an estimated 18.3% of total spending on brand-name drugs. Wholesalers and pharmacies combined kept just 8.1%. For generics, the imbalance was even more extreme.
This means the entity with the least public-facing role in filling your prescription captures the largest margin, while the pharmacy employing the pharmacist who checks your drug interactions, answers your questions, and administers your vaccines operates on a margin so thin that a single bad quarter can force a closure. Legislative efforts to increase PBM transparency and regulate spread pricing are underway in multiple states and at the federal level, but the pace of closures is outrunning the pace of reform.
For the millions of Americans who depend on a nearby pharmacy, the math is straightforward: until the economics of dispensing a prescription change, more stores will close, and the distance to the nearest pharmacist will keep growing.